Mayor Rahm Emanuel's economic team sees reinvention of city government as essential to easing financial woes

Idea floated of 'managed competition,' which would pit city union workers against private companies to bid on contracts to provide services such as garbage pickup

May 22, 2011|By Kathy Bergen, Tribune reporter

New Chicago Deputy Mayor Mark Angelson speaks with Mayor Rahm Emanuel during a meeting of the Mayor's Council on Budget, Business Development and Economic Issues at City Hall Friday. Angelson is chairman of the council. (Alex Garcia, Chicago Tribune)

Mayor Rahm Emanuel's top economic advisers promise nothing less than reinvention of city government as they develop strategies for slashing a looming massive deficit.

Ultimately, Chicagoans may end up with a government more like Charlotte, N.C., which tries to run as much like a private business as possible. One of that city's key strategies has been extensive use of a concept called "managed competition," in which public employees compete against private bidders for contracts to provide services such as trash collection.

Such a sweeping change, talked about by Emanuel during the election and again Tuesday in his first full day in office, could pit the new mayor against unionized city workers and potentially raise questions about which private businesses stand to gain. And getting an unwieldy City Council on board could pose another challenge.

But the mayor is facing a nearly $700 million deficit next year, and a spokesman for the city's budget office on Friday said Emanuel believes that if city employees cannot perform their jobs cost effectively, than the city "must consider putting services out to managed competition.'' It is among a wide range of ideas the mayor's newly appointed economic council will explore.

"Do we have a huge problem? The answer is, yes," said Mark Angelson, the city's new deputy mayor and a former chief executive of R.R. Donnelley & Sons Co. "Is it solvable? The answer is, yes."

An executive with a track record for consolidation and cost cutting, Angelson is leading the Mayor's Council on Budget, Business Development and Economic Issues, which will offer recommendations on eliminating the deficit and on beefing up economic development efforts.

While Emanuel rolled out plans to cut $75 million from the 2011 budget on Tuesday, the city still faces a deficit of as much as $700 million next year. Finding ways to bring the city's spending in line with its revenue is critical for rebuilding confidence among the business leaders who make decisions on where to locate and expand their businesses, Angelson said. "They are two pieces of the same puzzle," he said.

The panel's primary marching orders are to find ways to cut costs, rather than to look for new revenue streams at this point, said Alexandra Holt, the city's budget director and a member of the new panel.

"We will look at what other cities have done, and Charlotte has done a lot of interesting stuff," said Holt, an attorney with Baker & McKenzie before rejoining the city's economic team. She previously worked for the city for more than a decade, including as managing deputy budget director from 2002-04.

Among other initiatives, Charlotte partnered with Mecklenburg County to eliminate duplicative services. The Charlotte police, for instance, patrol the entire region, while the county does all the parks planning, said Ron Kimble, Charlotte's deputy city manager.

And now, Emanuel and Cook County President Toni Preckwinkle have launched an effort to find areas of potential collaboration, whether in purchasing, technology or health care.

An even more dramatic transformation began in Charlotte in 1993, when a newly elected Republican administration decided it wanted to wring costs out of government. Charlotte privatized about 100 services.

But it also began pursuing managed competition, a concept tested as well in the 1990s in Indianapolis by then-Mayor Stephen Goldsmith, now deputy mayor of New York.

In Charlotte, residential garbage collection, city vehicle maintenance, water treatment and meter reading were among the more than 60 services put up for managed competition. Such moves shaved about 3 percent from annual costs, Kimble estimated. Overall, it has saved the city about $15 million, he said.

Charlotte city workers restructured operations and won the contracts about 70 percent of the time.

"The fundamental point is competition. … This injects competition into what was monopolistic service," said Leonard Gilroy, director of government reform for the Reason Foundation, a free-market think tank in Los Angeles.

Charlotte's workforce is not unionized, a sharp difference from Chicago. But some observers say this isn't necessarily a deal-killer, both because public workers often win the contracts and because many private firms in Chicago use unionized labor.

A bigger risk, said one observer, is the potential for contracts to go to the politically connected.

"If you award contracts to cronies, that's a problem," said Aaron Renn, an urban affairs analyst who publishes the website Urbanophile. "In Illinois, that's always a risk … you need to be careful how it's bid out, how it's structured."

But he and others support these sorts of structural shifts.

"There are mixed results and judgments as to the efficacy of these things," said Frank Beal, executive director of Metropolis Strategies, a business-led civic organization. "Nonetheless, these times demand some aggressive experimentation."